On Tue, Sep 2, 2008 at 2:16 PM, John Williams <[EMAIL PROTECTED]>wrote:
> > Anyway, do you think that > a logging company that clear cuts its forests will be the most profitable, > in the long run, in a competitive market? Well, I do... if by clear-cutting it drives the competition out of business. For public companies, the "long run" is anything more than a year or two, at best. The stock market likes consistent profits from quarter to quarter. There's a damned if you do and damned if you don't in the market. If you're a small company, nobody cares if you're investing for the long run because they can't be bothered to understand the strategy of a small player. If you're a large company, the market expects you to figure out how to be profitable every quarter *and* invest for the future. Thus the public markets encourage businesses to ignore the long-term issues. What's more, the tenure of top management at public companies is short and their compensation has nothing to do with how the company performs after they leave, so again, no incentive, even a disincentive, to have a real long-term strategy. Who cares if the company will run out of trees, as long as it isn't going to happen until long after the current senior management and board are gone? And if we don't keep profits up now, we'll be gone that much sooner. It is very, very hard for anybody to make present-day sacrifices for long-term profits when the guy next door is cashing in stock options worth millions. In fact, one risks a lawsuit that would argue that the board is failing in its fiduciary responsibility to protect shareholder value. Shareholder value is now or in the few years, not in a decade or two. Pardon if it seems like I'm repeating myself... but even for venture capital, which plays for a longer term than the public markets, long-term is 4-5 years. If you can't show the possibility of a 10x return in that time frame, you don't get to play. Look at what has happened in a traditionally low-risk marketplace -- real estate -- lately. Even there, investors started having crazy expectations. And yes, the market is correcting, but look at the fallout. I've played the game a lot, raising venture money, IPOs, advising large and small companies on high-risk investments in emerging markets. Maybe I'm biased because that's the world I've lived in for many years now... but what I see is people who mostly let the long term take care of itself. As long as a few people are becoming millionaires and billionaires and the rest of us think we have a shot at the same, nobody sees any need to change their perspective. Nick _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
